🚀 go-pugleaf

In article <daco4f$drv$3@blue.rahul.net>,
 Merlin Dorfman <dorfman@green.rahul.net> wrote:
>David Marc Nieporent <nieporen@alumni.princeton.edu> wrote:
>>  Merlin Dorfman <dorfman@green.rahul.net> wrote:
>>>BTR wrote:
>>>>  Merlin Dorfman <dorfman@green.rahul.net> wrote:

>>>>>      Frankly I don't think that a different decision would really
>>>>> have changed anything. Governments would have seized the land for 
>>>>> "a park," then a few months later turned around and sold it to the
>>>>> private developers.

>>>> Yeah, you're probably right.
>>>> Frankly, I don't know why I should be allowed to have a savings account, 
>>>> either. I'm sure Wal-Mart or some real estate developer could put the 
>>>> money to better use. This would surely be "for the public good."

>>>     The property owners will, I'm sure, be paid more than their
>>>property is worth (though of course that was not the point of their suit).  

>> No; by definition, they're being paid less than the property is worth to 
>> them.  If they were being paid more, they'd sell.

>     If you read the Constitution, it says "just compensation."
>That pretty obviously means fair market value, not what somebody
>who has an emotional attachment to the property would want for it.

That's not "obvious" as a factual matter, an economic matter, or a legal 
matter.  Several Justices raised the issue at oral arguments in Kelo, but 
declined to address it in this case because it wasn't the argument being 
made by the appellants.  A couple of Justices hinted they'd be sympathetic 
to hearing a case which presented such an issue.


>> In practical terms, anybody who has been involved in a legal condemnation 
>> actions knows that the amounts paid are always lowballed.  Monopsonies 
>> backed up with guns tend to have an awful lot of market power.

>     Quite the opposite; all the condemnation proceedings I've
>seen give the property holders far more than the property would
>be worth on the open market 

Well, we can play dueling non-anecdotes all day, but since neither of us 
have anything to point to other than our experiences, it won't get us far.

But economic theory and logic suggest that property holders end up with 
less.  Why?  Because if they fight the amount of the offer in court, the 
*most* they can expect to end up with is the fair market value, *LESS THEIR 
LEGAL EXPENSES.*  

Let's say the owner thinks the house would be worth $500,000 in a fair, 
arms-length, non-gunpoint sale.  The developer -- whether it be a public 
official or more likely a private developer who has the public officials in 
his pocket, as in New London -- offers $480,000.  The owner can take it -- 
or go to court, win his valuation of $500,000, and end up netting $475,000 
or less.  Very few owners can afford that, so very few fight unless 
_severely_ lowballed.

>(before the redevelopment, of course
>--after redevelopment it is worth a lot more).

The value of a property, of course, is not determined by the value of the 
current use, but by the discounted value of potential uses.

---------------------------------------------
David M. Nieporent    nieporen@alumni.princeton.edu